ECB needs time for March moves to work: Constâncio

ToddBuell

FRANKFURT--The European Central Bank still has policy tools it can use to bring inflation back to its near 2% target, the central bank's vice president said Monday. He added, however, that the central bank needed to allow time for the package of measures agreed in March to take hold, suggesting that it is unlikely to change policy soon.

According to published remarks prepared for an event in London, Vítor Constâncio said that the eurozone economy was in a stronger position to handle negative shocks than was once the case and said that "data points towards a continued moderate recovery, which is nonetheless still subject to fragilities."

The comments underscore that the central bank wants to be patient after the ECB agreed on a comprehensive set of new measures in March. Then the ECB cut all of its interest rates, increased the size and scope of its bond-purchase program and launched new bank loans designed to encourage lending to the private sector. Inflation has been below target for three years and official data most recently showed inflation at minus 0.2% in annual terms.

"The ECB will continue to do what is necessary to achieve its goal of reaching a level of inflation close to 2% and enough policy tools can still be used," he said. "Our monetary policy has been effective," he said, but "we have to allow some time for the package of measures adopted in March to produce its effects, while closely monitoring external developments."

Mr. Constâncio added the central bank couldn't be the only body lifting the eurozone economy. There were "three policies which are ripe for action," he said. These were measures to boost productivity, implementing "growth friendly fiscal policies", and the completion of a union in banking and capital markets. "Combined, this would make the euro area fit to deliver a more prosperous future for its citizens," he concluded.

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